An Introduction to Modern Pricing of Interest Rate Derivatives
Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
This thesis studies interest rates (even negative), interest rate derivatives and term structure of interest rates. We review the different types of interest rates and go through the evaluation of a derivative using risk-neutral and forward-neutral methods. Moreover, the construction of interest rate models (term-structure models), pricing of bonds and interest rate derivatives, using both equilibrium and no-arbitrage approaches are discussed, compared and contrasted. Further, we look at the HJM framework and the LMM model to evaluate and simulate forward curves and find the forward rates as the discount factors. Finally, the new framework (after financial crisis in 2008), under the collateral agreement (CSA) has been taken into consideration.
Place, publisher, year, edition, pages
2015. , 121 p.
Interest Rates, Negative Interest Rates, Market Model, Martingale, Security Market Model, Term Structure Model, Risk-Neutral Measure, Forward-Neutral Measure, LIBOR, HJM, Collateral, Swap, Tenor, Interest Rate Derivatives, CSA Agreement, Bachelier.
IdentifiersURN: urn:nbn:se:mdh:diva-28415OAI: oai:DiVA.org:mdh-28415DiVA: diva2:824201
Subject / course
2015-06-05, Västerås, 10:00 (English)
Röman, Jan, Consult. Senior LecturerMalyarenko, Anatoliy, Professor
Carlsson, Linus, Senior Lecturer